Seasonality

Monthly data are certainly driven by seasonal factors and can be noisy. While the flows into U.S. bond funds are not statistically seasonal, the flows into world bond funds and both U.S. and world equity funds are seasonal. The average monthly factors shown in there contain some surprises. (Note: These factors are divisors; numbers greater than 100 percent indicate seasonal strength while numbers less than 100 percent indicate seasonal weakness.)

Remember the January Effect — that supposed slam-dunk trade of small stocks rising in January? Net flows into world equity funds exhibit a pronounced January Effect; the seasonal factor here is 150.7 percent. Net flows into world equity funds decline into July and remain weak through the remainder of the year. Net flows into U.S. equity funds are strongest in April and November and weakest in August, while net flows into world bond funds are strongest in February and decline into October.

Interestingly, while these flows are seasonal, neither any major currency nor the dollar index has statistically significant seasonality.